The Changing Face of Online Music

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On Monday, September 8, the Recording Industry Association of America (RIAA) sued 261 ordinary American computer users, accusing them of using peer-to-peer file-sharing services, such as Grokster, Kazaa, and Morpheus, to illegally distribute and download large amounts of copyrighted music over the Internet. One of the suits involved a 12-year old girl named Brianna LaHara, who had just started the seventh grade at St. Gregory the Great Catholic School on Manhattan's West Side.

Then, this past Tuesday, September 23, BMG Music, one of RIAA's member companies, released a music CD with copy protection, the first time it had done so here in the States. If you purchase "Comin' from Where I'm From," by singer-songwriter Anthony Hamilton, included software from SunnComm Technologies will prevent you from making more than three copies of each track, and you won't be able to swap those copies over a peer-to-peer file-sharing service.

Ever since the rise of Napster, the first large-scale file-sharing service, the RIAA has waged a massive campaign to eliminate the free exchange of copyrighted music online, vociferously claiming that such song swapping results in millions of dollars in lost revenue for its member companies, the major record labels. But wary of angering potential buyers, the organization had focused most of its efforts on battling the companies that run the file-sharing services, not the individuals that use them.

Individually, those same music labels have long dabbled with CD copy protection from companies like SunnComm and its primary competitor, Macrovision. But since SunnComm and Music City Records were sued over a copy-protected CD in September 2001, such protection has been limited to promotional and foreign releases.

September has brought not one but two important turning points in the fight over online music. These events will not put an end to file sharing, though. Just as the Internet community found a way to swap files without Napster, which was all but shut down by an RIAA lawsuit in 2000, it will find a way around CD protection and this new round of lawsuits against users. But recent developments could move a large number of people to RIAA-sanctioned online services, such as Apple's iTunes, Real Networks' Rhapsody, and MusicRebellion.com, where you can purchase songs for a fee.

According to Minnesota research firm Ipsos-Reid, over 60 million Americans swap songs over peer-to-peer file-sharing services. Moving 60 million people is no easy task.

Most legal experts expect the recent file-sharing lawsuits to settle in favor of the RIAA. "Ninety-eight percent of all cases settle before trial, and these suits will probably follow that pattern," says William Hebert, an intellectual property lawyer in the San Francisco offices of the international law firm Coudert Brothers LLP. Several defendants, including Brianna LaHara, have already reached settlements in the range of $2,000 to $3,000.

But the RIAA can't file 60 million suits, and in all likelihood it can't frighten 60 million file sharers into quitting on their own. It may even have trouble fulfilling a promise to file "thousands" of additional suits over the coming months.

To bring suit against individual file-sharers, the RIAA must first subpoena their names and addresses from Internet service providers, and though ISPs are legally obliged to surrender such information under the Digital Millennium Copyright Act (DMCA) of 1998, this could be changing. Verizon is fighting RIAA subpoenas in the District of Columbia Court of Appeals, and in Congress, Senator Sam Brownback (RKS) has introduced a bill that would reverse the DMCA.

Even if the law remains unchanged, most industry experts believe that people will soon be able to share files without revealing their IP addresses, so the RIAA would have no way of linking sharers to ISP accounts. "As fast as the RIAA can come up with a way to stop file-sharing, people will always find a way around it," says Mike McGuire, a market analyst who closely follows the file-sharing market for research firm Gartner. Either individual users will find ways of hiding their identities, or the file-sharing vendors will provide such protection of their own, says McGuire. "Companies will make it so that reaching the end user will be almost impossible," says Elan Oren, CEO of the file-sharing service iMesh.

Likewise, computer users will not lay down as SunnComm and Macrovision continue to build copy-protection into CDs and companies like Microsoft and ContentGuard work to protect copyrighted material by introducing Digital Rights Management (DRM) standards.

"Under the audio home recording act of 1992, it is clear that individuals have the right, when they purchase music lawfully, to make a copy of that music, onto any medium, for their own personal home use," says Cydney Tune, a copyright lawyer in the San Francisco offices of the internal firm Pillsbury Winthrop LLP. "People may use this to fight the introduction of CDs that can't be copied." And, of course, software developers could find technological means of circumventing copy protection.

Nonetheless, RIAA lawsuits and CD copy protection will shift a good number of people away from the peer-to-peer file-sharing services. According to Internet research firm Nielsen//NetRatings, when the RIAA first announced in June that it would be suing individual file-sharers, traffic on services like Kazaa and Morpheus dropped by 15 percent over the following week.

This creates an enormous opportunity for iTunes and other for-pay online services. "The people who are the most nervous over the lawsuits, including parents whose kids are online, are going to explore these alternatives," says Gartner's McGuire. "If I was running one of the pay online music services, I would be doing everything in my power to increase my marketing exposure and try to bring some of these people onboard."

At least one person has already made the switch. When Brianna LaHara settled her suit on September 10, paying the RIAA $2000 and agreeing not to share files online, MusicRebellion.com signed her up for its pay service and gave her $2,000 in free songs. The major music labels haven't won the fight against online file-sharing, but they've certainly stirred things up.

In a late-breaking development, the Associate Press is reporting that one of the chief peer-to-peer file sharing software companies, Kazaaa, is now suing the record labels for copyright infringement. Click here for more details.